UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 _____________________________________ FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2020 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-36522 Investar Holding Corporation (Exact name of registrant as specified in its charter) ( ...

Part I. Financial Information [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The unaudited consolidated financial statements for the three months ended March 31, 2020, show a significant decrease in net income to $0.6 million from $3.9 million in the prior-year period, primarily due to a large provision for loan losses related to the COVID-19 pandemic. Total assets grew to $2.20 billion from $2.15 billion at year-end 2019, driven by loan growth partially from the acquisition of two PlainsCapital Bank branches. Stockholders' equity decreased slightly to $233.3 million Consolidated Balance Sheet Highlights (Unaudited) | Account | March 31, 2020 ($ thousands) | December 31, 2019 ($ thousands) | | :--- | :--- | :--- | | **Total Assets** | **$2,199,369** | **$2,148,916** | | Loans, net | $1,715,561 | $1,681,275 | | Total Deposits | $1,728,826 | $1,707,706 | | **Total Liabilities** | **$1,966,097** | **$1,906,940** | | **Total Stockholders' Equity** | **$233,272** | **$241,976** | Consolidated Income Statement Highlights (Unaudited) | Account | Three months ended March 31, 2020 ($ thousands) | Three months ended March 31, 2019 ($ thousands) | | :--- | :--- | :--- | | Net Interest Income | $17,335 | $15,156 | | Provision for loan losses | $3,760 | $265 | | **Net Income** | **$608** | **$3,917** | | **Diluted EPS** | **$0.05** | **$0.40** | Consolidated Cash Flow Highlights (Unaudited) | Account | Three months ended March 31, 2020 ($ thousands) | Three months ended March 31, 2019 ($ thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $783 | $5,866 | | Net cash (used in) provided by investing activities | $(20,654) | $15,679 | | Net cash provided by financing activities | $13,718 | $33,718 | | **Net change in cash and cash equivalents** | **$(6,153)** | **$55,263** | [Note 1. Summary of Significant Accounting Policies](index=12&type=section&id=Note%201.%20Summary%20of%20Significant%20Accounting%20Policies) The financial statements are prepared under U.S. GAAP for interim reporting. The company highlights that the COVID-19 pandemic has made certain material estimates, particularly the allowance for loan losses, more challenging. It adopted new accounting standards for fair value measurement disclosures and goodwill impairment testing in 2020. The company is also applying relief provisions from the CARES Act and interagency guidance for loan modifications related to COVID-19, which allows such modifications not to be classified as Troubled Debt Restructurings (TDRs) - The COVID-19 pandemic has made material estimates, such as the allowance for loan losses, fair value of financial instruments, and goodwill, more challenging and susceptible to significant change[30](index=30&type=chunk)[32](index=32&type=chunk) - The company is offering short-term loan modifications (e.g., 90-day deferrals) to borrowers affected by COVID-19. In line with the CARES Act and regulatory guidance, these modifications are not accounted for as Troubled Debt Restructurings (TDRs)[59](index=59&type=chunk)[60](index=60&type=chunk)[61](index=61&type=chunk) - As of May 4, 2020, approximately **$531 million**, or **30% of the total loan portfolio**, was in the loan deferral program. **87% of these loans** are secured by real estate[61](index=61&type=chunk) - The company performed an interim goodwill impairment test as of March 31, 2020, due to a significant decline in its market capitalization and concluded that **goodwill was not impaired**[57](index=57&type=chunk) [Note 2. Business Combinations](index=18&type=section&id=Note%202.%20Business%20Combinations) The company completed the acquisition of two branch locations from PlainsCapital Bank on February 21, 2020, for approximately $11.1 million in cash. This transaction added $45.3 million in loans and $37.0 million in deposits, resulting in $0.5 million of goodwill. The note also provides final details on the 2019 acquisitions of Mainland Bank and Bank of York PlainsCapital Branch Acquisition (Feb 21, 2020) | Item | Amount ($ thousands) | | :--- | :--- | | Purchase Price (Cash) | $11,114 | | Fair Value of Loans Acquired | $45,287 | | Fair Value of Deposits Assumed | $36,973 | | Goodwill Recorded | $464 | - Acquisition-related costs of $0.8 million were recorded in Q1 2020, primarily related to the PlainsCapital branch acquisition[83](index=83&type=chunk) [Note 4. Investment Securities](index=21&type=section&id=Note%204.%20Investment%20Securities) The company's investment securities portfolio totaled $290.5 million at fair value as of March 31, 2020, up from $274.2 million at year-end 2019. The portfolio is primarily composed of residential and commercial mortgage-backed securities. Gross unrealized losses on available-for-sale (AFS) securities increased significantly to $3.0 million from $0.8 million at year-end, largely attributed to market volatility from the COVID-19 pandemic. Management considers these impairments temporary Investment Securities Portfolio (Amortized Cost) | Security Type | March 31, 2020 ($ thousands) | December 31, 2019 ($ thousands) | | :--- | :--- | :--- | | Available for Sale (AFS) | $274,041 | $258,104 | | Held to Maturity (HTM) | $14,253 | $14,409 | | **Total** | **$288,294** | **$272,513** | - Gross unrealized losses on AFS securities increased from **$0.8 million** at Dec 31, 2019 to **$3.0 million** at March 31, 2020. This change is largely attributed to the market impact of the COVID-19 pandemic[91](index=91&type=chunk)[94](index=94&type=chunk)[97](index=97&type=chunk) - The company does not consider any securities to be other-than-temporarily impaired, as it has the intent and ability to hold them until maturity or a forecasted recovery[94](index=94&type=chunk)[98](index=98&type=chunk) [Note 5. Loans & Allowance for Loan Losses](index=24&type=section&id=Note%205.%20Loans%20%26%20Allowance%20for%20Loan%20Losses) Total loans increased to $1.73 billion at March 31, 2020, from $1.69 billion at year-end 2019. The allowance for loan losses (ALL) increased significantly to $14.2 million from $10.7 million, driven by a $3.8 million provision for loan losses in Q1 2020. This provision reflects the deteriorating economic outlook due to the COVID-19 pandemic. Nonperforming loans rose to $7.6 million (0.44% of total loans) from $6.3 million at year-end. The ALL as a percentage of total loans increased to 0.82% Allowance for Loan Losses Activity (Q1 2020) | Item | Amount ($ thousands) | | :--- | :--- | | Balance, beginning of period | $10,700 | | **Provision for loan losses** | **$3,760** | | Loans charged off | $(262) | | Recoveries | $35 | | **Balance, end of period** | **$14,233** | Loan Portfolio Composition | Loan Category | March 31, 2020 ($ thousands) | % of Total | | :--- | :--- | :--- | | Commercial real estate | $776,354 | 44.9% | | Commercial and industrial | $313,850 | 18.1% | | 1-4 Family | $328,730 | 19.0% | | Construction and development | $191,597 | 11.1% | | Other | $119,263 | 6.9% | | **Total Loans** | **$1,729,794** | **100.0%** | - Nonaccrual loans increased to **$4.4 million** at March 31, 2020, from **$3.0 million** at December 31, 2019[108](index=108&type=chunk)[111](index=111&type=chunk) - Impaired loans, including TDRs and nonaccrual loans, increased to **$3.6 million** at March 31, 2020, from **$2.5 million** at December 31, 2019[142](index=142&type=chunk)[144](index=144&type=chunk)[146](index=146&type=chunk) [Note 7. Stock-Based Compensation](index=35&type=section&id=Note%207.%20Stock-Based%20Compensation) The company maintains the 2017 Long-Term Incentive Compensation Plan for granting equity awards. For the three months ended March 31, 2020, total stock-based compensation expense was approximately $0.37 million ($73,000 for stock options and $0.3 million for restricted stock/units). As of March 31, 2020, there was $5.3 million of unrecognized compensation cost expected to be recognized over a weighted-average period of approximately 3.7-3.8 years Stock-Based Compensation Expense (Q1) | Award Type | 2020 ($ thousands) | 2019 ($ thousands) | | :--- | :--- | :--- | | Stock Options | $73 | $68 | | Restricted Stock & RSUs | $300 | $200 | - As of March 31, 2020, **243,937 shares** were available for future grants under the 2017 Long-Term Incentive Compensation Plan[156](index=156&type=chunk) [Note 8. Derivative Financial Instruments](index=37&type=section&id=Note%208.%20Derivative%20Financial%20Instruments) The company uses pay-fixed interest rate swaps designated as cash flow hedges to manage interest rate risk on its borrowings. As of March 31, 2020, these swaps had a total notional amount of $105.0 million ($70.0 million active and $35.0 million forward-starting). Due to falling interest rates, the company recognized a $2.5 million loss in other comprehensive income for the change in fair value of these swaps during Q1 2020. The company also enters into back-to-back swaps with commercial customers, which have no material impact on earnings - The company had interest rate swaps with a total notional amount of **$105.0 million** designated as cash flow hedges as of March 31, 2020[167](index=167&type=chunk) - A loss of **$2.5 million** was recognized in Other Comprehensive Income for the change in fair value of interest rate swaps in Q1 2020, compared to a loss of **$0.2 million** in Q1 2019[168](index=168&type=chunk) [Note 9. Fair Values of Financial Instruments](index=38&type=section&id=Note%209.%20Fair%20Values%20of%20Financial%20Instruments) This note details the fair value hierarchy (Levels 1, 2, and 3) for financial instruments. As of March 31, 2020, the majority of assets measured at fair value on a recurring basis, such as investment securities, were classified as Level 2. Level 3 assets, which use significant unobservable inputs, consisted of $16.9 million in obligations of state and political subdivisions. The fair value of these Level 3 assets decreased from $19.4 million at year-end 2019 due to unrealized losses Assets Measured at Fair Value on a Recurring Basis (March 31, 2020) | Level | Amount ($ thousands) | Primary Components | | :--- | :--- | :--- | | Level 1 | $1,270 | Equity securities | | Level 2 | $259,408 | Most investment securities | | Level 3 | $16,873 | Obligations of state and political subdivisions | - The balance of Level 3 assets measured on a recurring basis decreased from **$19.4 million** to **$16.9 million** during Q1 2020, primarily due to **$2.5 million** in unrealized losses included in other comprehensive income[189](index=189&type=chunk)[190](index=190&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=45&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the significant negative impact of the COVID-19 pandemic on Q1 2020 results, leading to a net income of only $0.6 million compared to $3.9 million in Q1 2019. This was driven by a $3.8 million provision for loan losses and a $0.8 million loss on equity securities. The company completed the acquisition of two PlainsCapital Bank branches, adding $45.3 million in loans and $37.0 million in deposits. The company is actively managing risks through loan deferral programs and participation in the PPP. Net interest income grew 14.4% due to asset growth from acquisitions, but the net interest margin compressed by 7 basis points to 3.46% [Recent Developments Related to COVID-19](index=46&type=section&id=Recent%20Developments%20Related%20to%20COVID-19) The COVID-19 pandemic and related government responses significantly impacted the economic environment in Q1 2020. The company has responded by participating in the Paycheck Protection Program (PPP), offering loan modifications under the CARES Act, and adjusting its operations by closing branch lobbies and enabling remote work. The financial impact in Q1 was a decreased net income, primarily due to a $3.8 million provision for loan losses and a $0.8 million unrealized loss on equity securities - The company is an active lender in the Small Business Administration's (SBA) Paycheck Protection Program (PPP), having funded approximately **$75 million** in loans to over **300 customers** through May 4, 2020[220](index=220&type=chunk) - The company is offering short-term loan modifications (90 days or less) to borrowers affected by COVID-19, which are not being classified as Troubled Debt Restructurings (TDRs) per CARES Act and regulatory guidance[221](index=221&type=chunk)[222](index=222&type=chunk)[223](index=223&type=chunk) - Operational changes in response to the pandemic include closing branch lobbies to the public (except by appointment), servicing customers through drive-thrus and digital channels, and expanding remote work capabilities for employees[224](index=224&type=chunk) [Discussion and Analysis of Financial Condition](index=49&type=section&id=Discussion%20and%20Analysis%20of%20Financial%20Condition) As of March 31, 2020, total assets were $2.2 billion. Total loans grew by $37.8 million (2.2%) during the quarter to $1.73 billion, including $44.5 million from the PlainsCapital branch acquisition. Total deposits increased by $21.1 million (1.2%) to $1.73 billion, including $37.0 million from the acquisition. The company increased its borrowings from the FHLB by $36.1 million to $167.7 million to manage liquidity Loan Portfolio Composition | Loan Category | March 31, 2020 ($ thousands) | % of Total | | :--- | :--- | :--- | | Total mortgage loans on real estate | $1,387,763 | 80.3% | | Commercial and industrial | $313,850 | 18.1% | | Consumer | $28,181 | 1.6% | | **Total loans** | **$1,729,794** | **100.0%** | - Approximately **6.0%** of the total loan portfolio at March 31, 2020, was concentrated in industries potentially more affected by the pandemic, including oil and gas (**3.2%**), food services (**1.8%**), hospitality (**0.4%**), and entertainment (**0.6%**)[243](index=243&type=chunk) Deposit Composition | Deposit Category | March 31, 2020 ($ thousands) | % of Total | | :--- | :--- | :--- | | Noninterest-bearing demand | $339,379 | 19.6% | | Interest-bearing demand | $378,787 | 21.9% | | Money market & Savings | $315,896 | 18.3% | | Time deposits | $694,764 | 40.2% | | **Total deposits** | **$1,728,826** | **100.0%** | [Results of Operations](index=53&type=section&id=Results%20of%20Operations) Net income for Q1 2020 was $0.6 million, a sharp decline from $3.9 million in Q1 2019. The decrease was primarily caused by a $3.8 million provision for loan losses and a $0.8 million loss on the fair value of equity securities, both related to the economic impact of COVID-19. Net interest income increased 14.4% to $17.3 million due to loan growth, but the net interest margin declined 7 basis points to 3.46%. Noninterest income fell 15.0% to $1.1 million, while noninterest expense rose 23.0% to $13.9 million, driven by growth and acquisition-related costs Key Performance Ratios (Q1) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Net Interest Margin | 3.46% | 3.53% | | Return on Average Assets | 0.11% | 0.86% | | Return on Average Equity | 1.00% | 8.37% | - Net interest income increased by **$2.2 million** year-over-year, driven by a $263.2 million increase in average loans. However, the net interest margin decreased by **7 basis points** due to a higher cost of funds relative to asset yields[263](index=263&type=chunk)[266](index=266&type=chunk) - Noninterest income decreased by **$0.2 million**, mainly due to a **$0.8 million** loss on the fair value of equity securities, which was a direct result of market volatility from the pandemic[273](index=273&type=chunk)[274](index=274&type=chunk) - Noninterest expense increased by **$2.6 million**, primarily due to a **$1.5 million** increase in salaries and benefits from a larger employee base following acquisitions and organic growth[275](index=275&type=chunk) [Risk Management](index=57&type=section&id=Risk%20Management) The company's primary risks are credit, interest rate, and liquidity. Credit risk management was highlighted by a significant increase in the allowance for loan losses to $14.2 million (0.82% of total loans) due to the COVID-19 pandemic. Nonperforming loans increased to $7.6 million. Interest rate risk is managed by the Asset Liability Committee (ALCO), with simulations showing that a 100 basis point increase in rates would decrease net interest income by an estimated 0.8%, well within policy limits Allowance for Loan Losses (ALL) Analysis | Metric | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | ALL Balance | $14,233 thousand | $10,700 thousand | | ALL to Total Loans | 0.82% | 0.63% (calculated) | | ALL to Nonperforming Loans | 188.35% | 170.2% (calculated) | - The provision for loan losses was **$3.8 million** in Q1 2020, compared to only **$0.3 million** in Q1 2019, primarily due to the deterioration of market conditions from the COVID-19 pandemic[285](index=285&type=chunk) Interest Rate Sensitivity Analysis (as of March 31, 2020) | Rate Shock (basis points) | Estimated Impact on Net Interest Income | | :--- | :--- | | +200 | (1.6)% | | +100 | (0.8)% | | -100 | 0.5% | [Liquidity and Capital Resources](index=63&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains a strong liquidity position, with core deposits funding 68% of total assets. Additional liquidity sources include the investment portfolio, FHLB advances (with $595.0 million available), and unsecured lines of credit ($60.0 million available). The company and the Bank were both in compliance with all regulatory capital requirements and the Bank was considered "well-capitalized" as of March 31, 2020. The company repurchased 326,636 shares for $6.6 million during the quarter - The company has significant available liquidity, including **$595.0 million** in remaining credit from the FHLB and **$60.0 million** in unsecured lines of credit with other banks[315](index=315&type=chunk)[317](index=317&type=chunk) Regulatory Capital Ratios (Company) | Ratio | March 31, 2020 | Minimum Requirement | | :--- | :--- | :--- | | Tier 1 Leverage | 9.82% | 4.00% | | Common Equity Tier 1 | 10.95% | 4.50% | | Tier 1 Capital | 11.30% | 6.00% | | Total Capital | 14.39% | 8.00% | - During Q1 2020, the company repurchased **326,636 shares** of its common stock for **$6.6 million**[323](index=323&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=67&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section refers to the market risk disclosures in the company's 2019 Form 10-K and the "Risk Management" section within Item 2 of this report. It states that there have been no material changes in the company's market risk since December 31, 2019, other than those discussed in the MD&A - There have been no material changes in the Company's market risk since December 31, 2019, except as discussed in the MD&A section of this report[338](index=338&type=chunk) [Controls and Procedures](index=67&type=section&id=Item%204.%20Controls%20and%20Procedures) The Principal Executive Officer and Principal Financial Officer concluded that the company's disclosure controls and procedures were effective as of the end of the period. There were no material changes to the company's internal control over financial reporting during the quarter - Management concluded that disclosure controls and procedures are effective as of March 31, 2020[339](index=339&type=chunk) - No material changes were made to internal control over financial reporting during the first quarter of 2020[340](index=340&type=chunk) Part II. Other Information [Risk Factors](index=68&type=section&id=Item%201A.%20Risk%20Factors) The company has added a significant risk factor related to the COVID-19 pandemic. It highlights the high uncertainty and potential for adverse impacts on business, financial results, and operations. Specific risks include higher loan defaults, increased allowance for loan losses, reduced demand for services, lower interest income, potential goodwill impairment, and increased operational and litigation risks, including those related to the PPP loan program - A new, significant risk factor has been added detailing the adverse impacts of the COVID-19 pandemic, which has created worldwide economic uncertainty and disruption[343](index=343&type=chunk) - Specific financial risks from the pandemic include higher loan defaults, further increases in the allowance for loan losses, declines in collateral values, lower interest income from reduced market rates, and potential impairment of goodwill[345](index=345&type=chunk)[346](index=346&type=chunk) - Operational and legal risks include increased litigation risk from the PPP loan process, instability in the deposit base, and heightened cybersecurity threats[353](index=353&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=69&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reports no unregistered sales of equity securities during the quarter. Under its publicly announced share repurchase plan, the company repurchased a total of 326,636 shares at an average price of approximately $20.39 per share during the three months ended March 31, 2020. On March 10, 2020, the board authorized the repurchase of an additional 300,000 shares Issuer Purchases of Equity Securities (Q1 2020) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | January 2020 | 8,503 | $22.86 | | February 2020 | 29,033 | $22.45 | | March 2026 | 302,640 | $20.12 | | **Total** | **340,176** | **$20.39** | - On March 10, 2020, the board authorized an additional **300,000 shares** for repurchase under its stock repurchase plan. As of March 31, 2020, **299,698 shares** remained authorized for repurchase[353](index=353&type=chunk) [Exhibits](index=71&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including various agreements, articles of incorporation, bylaws, and certifications by the Principal Executive Officer and Principal Financial Officer as required by the Sarbanes-Oxley Act of 2002 - The exhibits include certifications from the CEO and CFO pursuant to Sections **302** and **906** of the Sarbanes-Oxley Act, as well as XBRL data files[357](index=357&type=chunk) Signatures

Part I [Item 1. Business](index=4&type=section&id=Item%201.%20Business) Investar Holding Corporation, a financial holding company with $2.1 billion in assets, provides commercial banking services in south Louisiana, southeast Texas, and west Alabama, growing through organic expansion and strategic acquisitions - **Financial Snapshot as of December 31, 2019** (in billions) | Metric | Value (in billions) | | :--- | :--- | | Total Assets | $2.1 | | Net Loans | $1.7 | | Total Deposits | $1.7 | | Stockholders' Equity | $0.242 | - The company's primary markets are south Louisiana (**86% of deposits**), southeast Texas, and west Alabama, served by **30 full-service branches**[13](index=13&type=chunk) - Growth strategy is a combination of organic expansion and strategic acquisitions, with **six whole-bank acquisitions** completed since the bank was chartered[13](index=13&type=chunk)[26](index=26&type=chunk) - Income from lending activities constituted **85% of total revenue** in 2019, with an increased focus on commercial real estate and commercial and industrial loans[19](index=19&type=chunk) [Operations](index=4&type=section&id=Operations) The company's community banking segment generates 85% of its revenue from lending, with a diversified loan portfolio focused on commercial real estate and industrial loans, complemented by a full suite of deposit services - **Loan Portfolio Composition (December 31, 2019)** | Loan Category | Percentage of Total Loans | | :--- | :--- | | Commercial Real Estate | 48% | | Commercial and Industrial | 19% | | One-to-four family residential | 19% | | Construction and development | 12% | | Consumer loans | 2% | - The bank has been exiting the indirect auto loan origination business since December 2015, with the remaining portfolio having a weighted average term of **2 years** at the end of 2019[23](index=23&type=chunk) - The company offers a competitive suite of cash management products for business clients, including remote deposit capture, virtual vault, and ACH origination[24](index=24&type=chunk) [Acquisition Activity](index=6&type=section&id=Acquisition%20Activity) The company actively pursues acquisitions, completing four whole-bank deals since 2017 and expanding into Texas and Alabama, alongside a pending acquisition and recent branch purchases - **Recent and Pending Acquisitions** | Target | Completion Date | Location | Key Details | | :--- | :--- | :--- | :--- | | Citizens Bancshares, Inc. | July 1, 2017 | Louisiana | $45.8M cash; Acquired $250.7M assets, $212.2M deposits | | BOJ Bancshares, Inc. | Dec 1, 2017 | Louisiana | $22.7M consideration ($3.95M cash, 799,559 shares); Acquired $152.1M assets, $125.8M deposits | | Mainland Bank | March 1, 2019 | Texas | $18.6M consideration (763,849 shares); Acquired $128.4M assets, $107.6M deposits | | Bank of York | Nov 1, 2019 | Alabama | $15.0M cash; Acquired $102.0M assets, $85.0M deposits | | Cheaha Financial Group, Inc. | Pending | Alabama | Definitive agreement for ~$41.1M cash. Cheaha had $209.6M assets, $179.0M deposits at YE 2019 | - In February 2020, the Bank acquired two branches from PlainsCapital Bank in Texas, adding approximately **$45.9 million** in loans and **$37.3 million** in deposits[31](index=31&type=chunk) [Competition](index=7&type=section&id=Competition) Investar competes in an intense financial market by leveraging its community bank approach, strong local relationships, and quality service, viewing market consolidation as a growth opportunity - **Deposit Market Share (as of June 30, 2019)** | Location | Investar Total Deposits (in millions) | Investar Share of Deposits | | :--- | :--- | :--- | | Baton Rouge, LA | $749 | 4.0% | | New Orleans, LA | $198 | 1.0% | | Lafayette, LA | $171 | 2.5% | | Evangeline Parish, LA | $190 | 30.2% | | East/West Feliciana Parishes, LA | $132 | 27.6% | | Houston, TX | $113 | 0.1% | | Sumter County, AL (pro forma) | $82 | 41.8% | - The company believes its local leadership, responsive service, and competitive products allow it to compete effectively against larger institutions[15](index=15&type=chunk)[35](index=35&type=chunk) [Supervision and Regulation](index=8&type=section&id=Supervision%20and%20Regulation) As a financial holding company, Investar and its subsidiary bank are subject to extensive federal and state banking regulations, including the Dodd-Frank Act, governing capital, activities, and consumer protection - The Company is a registered financial holding company supervised by the Federal Reserve, and the Bank is a national bank supervised by the OCC[39](index=39&type=chunk) - The Dodd-Frank Act has had a profound effect on the industry, establishing the Consumer Financial Protection Bureau (CFPB), increasing deposit insurance, and altering capital requirements[41](index=41&type=chunk)[42](index=42&type=chunk) - **Minimum Regulatory Capital Ratios (including conservation buffer)** | Ratio | Minimum Requirement | | :--- | :--- | | Common Equity Tier 1 to Risk-Weighted Assets | 7.0% | | Tier 1 Capital to Risk-Weighted Assets | 8.5% | | Total Capital to Risk-Weighted Assets | 10.5% | | Tier 1 Capital to Average Assets (Leverage) | 4.0% | - As of December 31, 2019, the Bank met the requirements to be categorized as "well capitalized" under the prompt corrective action framework[54](index=54&type=chunk) [Item 1A. Risk Factors](index=17&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant business risks from economic conditions, multi-state growth, management dependence, and geographic concentration, alongside industry risks from competition, regulation, and investment risks like stock price volatility [Risks Related to our Business](index=17&type=section&id=Risks%20Related%20to%20our%20Business) Business risks include economic dependency on primary markets, integration challenges from growth strategies, real estate loan concentration, increased allowance for loan losses from CECL, and LIBOR cessation impacts - The company's financial performance is highly dependent on the business environment in its primary markets of south Louisiana, southeast Texas, and west Alabama, with the coronavirus outbreak noted as a significant risk to economic activity[89](index=89&type=chunk)[90](index=90&type=chunk) - Approximately **79%** of the total loan portfolio has real estate as a primary or secondary component of collateral, exposing the company to risks from a downturn in the real estate market[101](index=101&type=chunk) - The adoption of the new Current Expected Credit Loss (CECL) accounting standard, effective for the company on January 1, 2023, is likely to result in an increase in the allowance for loan losses[110](index=110&type=chunk) - The planned cessation of LIBOR after 2021 creates uncertainty and risk for the company's LIBOR-linked financial instruments, including loans, debt, and hedging products that extend beyond 2021[118](index=118&type=chunk) [Risks Related to Our Industry](index=30&type=section&id=Risks%20Related%20to%20Our%20Industry) The company operates in a highly regulated industry, facing increased compliance costs from federal and state laws, and risks of sanctions from noncompliance with consumer protection and anti-money laundering regulations - The company is subject to extensive regulation and supervision under federal and state banking laws, with the Dodd-Frank Act significantly changing the regulatory structure and increasing compliance burdens[153](index=153&type=chunk)[154](index=154&type=chunk) - Failure to comply with the Community Reinvestment Act (CRA) and other fair lending laws could result in sanctions, including restrictions on mergers, acquisitions, and branch expansion[158](index=158&type=chunk) - Noncompliance with the Bank Secrecy Act and other anti-money laundering regulations could lead to significant fines, regulatory actions, and reputational damage[159](index=159&type=chunk) [Risks Related to an Investment in our Common Stock](index=32&type=section&id=Risks%20Related%20to%20an%20Investment%20in%20our%20Common%20Stock) Investment in common stock carries risks of price volatility, dividend policy changes due to regulatory restrictions, and potential anti-takeover provisions that could limit shareholder value - The company's ability to pay dividends is dependent on receiving dividends from its subsidiary, Investar Bank, which is subject to numerous legal and regulatory restrictions[166](index=166&type=chunk)[167](index=167&type=chunk) - Anti-takeover provisions in corporate documents and banking laws could discourage potential acquisition proposals and delay or prevent a change in control[168](index=168&type=chunk)[170](index=170&type=chunk) - An investment in the company's common stock is not an insured deposit and is subject to risk of loss[172](index=172&type=chunk) [Item 1B. Unresolved Staff Comments](index=35&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - There are no unresolved staff comments[174](index=174&type=chunk) [Item 2. Properties](index=36&type=section&id=Item%202.%20Properties) The company operates 30 branch offices across Louisiana, Texas, and Alabama, with its main office in Baton Rouge, owning most locations while leasing some in Texas - The main executive and operations center is located at 10500 Coursey Boulevard in Baton Rouge, Louisiana[175](index=175&type=chunk) - The company operates **30 branch offices** across Louisiana, Texas, and Alabama, with most facilities in Louisiana and Alabama owned, while some in Texas are leased[175](index=175&type=chunk)[176](index=176&type=chunk) [Item 3. Legal Proceedings](index=37&type=section&id=Item%203.%20Legal%20Proceedings) The company is not currently party to any legal proceedings expected to materially adversely affect its business, financial condition, or results of operations - The company reports no material legal proceedings[179](index=179&type=chunk) [Item 4. Mine Safety Disclosures](index=38&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable - This item is not applicable to the company[180](index=180&type=chunk) Part II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=39&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on Nasdaq under "ISTR," with a history of quarterly dividends since 2011, and repurchased 127 shares in Q4 2019 - The company's common stock trades on the Nasdaq Global Market under the symbol "ISTR"[182](index=182&type=chunk) - The company has a history of paying quarterly dividends since 2011, but future payments are at the discretion of the board and are subject to various legal and regulatory restrictions[183](index=183&type=chunk)[184](index=184&type=chunk) - **Issuer Purchases of Equity Securities (Q4 2019)** | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Oct 1 - Oct 31, 2019 | 127 | $23.70 | | Nov 1 - Nov 30, 2019 | — | — | | Dec 1 - Dec 31, 2019 | — | — | [Item 6. Selected Financial Data](index=42&type=section&id=Item%206.%20Selected%20Financial%20Data) Selected financial data for 2019 shows consistent growth in assets, loans, and deposits, with net income increasing to $16.8 million and improved performance ratios like Return on Average Assets at 0.85% - **Selected Financial Data (in thousands, except per share data)** | Metric | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | **Financial Condition** | | | | | Total Assets | $2,148,916 | $1,786,469 | $1,622,734 | | Total Gross Loans | $1,681,275 | $1,391,371 | $1,250,888 | | Total Deposits | $1,707,706 | $1,361,731 | $1,225,237 | | Total Stockholders' Equity | $241,976 | $182,262 | $172,729 | | **Income Statement** | | | | | Net Interest Income | $64,818 | $57,370 | $42,517 | | Net Income | $16,839 | $13,606 | $8,202 | | **Per Share Data** | | | | | Diluted EPS | $1.66 | $1.39 | $0.96 | | Book Value Per Share | $21.55 | $19.22 | $18.15 | | **Performance Ratios** | | | | | Return on Average Assets | 0.85% | 0.81% | 0.62% | | Return on Average Equity | 8.21% | 7.68% | 5.65% | | Net Interest Margin | 3.51% | 3.61% | 3.39% | [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=45&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the 23.8% net income increase in 2019 to strong interest-earning asset growth from organic expansion and acquisitions, despite a slight net interest margin compression, while maintaining strong credit quality and capital ratios - Net income for 2019 was **$16.8 million**, a **23.8% increase** from 2018, primarily due to growth in interest-earning assets[230](index=230&type=chunk) - Total assets increased by **20.3% to $2.1 billion**, and total loans grew by **20.8% to $1.7 billion** at year-end 2019[231](index=231&type=chunk) - The company completed two acquisitions in 2019: Mainland Bank in Texas and Bank of York in Alabama, which significantly contributed to asset and deposit growth[232](index=232&type=chunk)[233](index=233&type=chunk) - Net interest income grew **13.0% to $64.8 million** in 2019, while the net interest margin decreased **10 basis points to 3.51%** compared to 2018[276](index=276&type=chunk) [Financial Condition](index=51&type=section&id=Financial%20Condition) As of December 31, 2019, the company's financial condition strengthened with total assets reaching $2.1 billion, driven by significant growth in loans and deposits from organic expansion and acquisitions, alongside managed borrowings - **Loan Portfolio Composition (in thousands)** | Loan Type | Dec 31, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | Commercial Real Estate (Owner & Nonowner) | $731,060 | $627,004 | | Commercial and Industrial | $323,786 | $210,924 | | 1-4 Family Residential | $321,489 | $287,137 | | Construction and Land Development | $197,797 | $157,946 | | Consumer | $29,446 | $45,957 | | **Total Loans** | **$1,691,975** | **$1,400,825** | - Total deposits grew by **$346.0 million (25.4%) to $1.7 billion**, with noninterest-bearing deposits showing strong growth of **61.8% to $351.9 million**[256](index=256&type=chunk) - Advances from the FHLB decreased by **$74.9 million to $131.6 million**, as the company utilized available capital for repayments[260](index=260&type=chunk) [Results of Operations](index=57&type=section&id=Results%20of%20Operations) Net income for 2019 increased 23.8% to $16.8 million, driven by higher net interest income from asset growth, despite a slight margin decline, and supported by increased noninterest income, partially offset by higher noninterest expenses - **Performance Summary** | Metric | 2019 | 2018 | | :--- | :--- | :--- | | Net Income | $16.8M | $13.6M | | Diluted EPS | $1.66 | $1.39 | | Return on Average Assets | 0.85% | 0.81% | | Return on Average Equity | 8.21% | 7.68% | - The increase in net interest income was driven by a **$12.6 million increase** due to higher asset volume and a **$3.0 million increase** due to higher rates, partially offset by an **$8.1 million increase** in interest expense[231](index=231&type=chunk) - Noninterest income increased by **$1.9 million**, primarily due to a **$0.9 million increase** in other operating income and a **$0.6 million positive change** in the fair value of equity securities[287](index=287&type=chunk) - Noninterest expense increased by **$6.3 million**, with salaries and employee benefits rising by **$3.2 million** due to acquisitions and new branches[303](index=303&type=chunk)[304](index=304&type=chunk) [Risk Management](index=63&type=section&id=Risk%20Management) The company actively manages credit, interest rate, and liquidity risks, maintaining low nonperforming loans, an adequate allowance for loan losses, and sufficient liquidity, while monitoring interest rate sensitivity - **Asset Quality Ratios** | Metric | Dec 31, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | Nonperforming Loans to Total Loans | 0.37% | 0.42% | | Allowance for Loan Losses to Total Loans | 0.63% | 0.67% | | Allowance for Loan Losses to Nonperforming Loans | 171% | 159% | | Net Charge-offs to Average Loans | 0.04% | 0.08% | - The allowance for loan losses increased to **$10.7 million** at year-end 2019 from **$9.5 million** in 2018 to support organic loan growth[319](index=319&type=chunk) - **Interest Rate Sensitivity Analysis (as of Dec 31, 2019)** | Rate Shock (basis points) | Estimated Change in Net Interest Income | | :--- | :--- | | +200 | (0.1)% | | +100 | 0.1% | | -100 | (3.0)% | - The company had **$594.6 million** in remaining credit available from the FHLB at December 31, 2019[356](index=356&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=75&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section incorporates by reference the market risk disclosures from the "Risk Management" section within Item 7 - The required disclosures about market risk are included in the 'Risk Management' section of Item 7[380](index=380&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=76&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's consolidated financial statements for the fiscal year ended December 31, 2019, including balance sheets, income statements, cash flows, and accompanying notes, along with management's and auditor's reports [Management's Report on Internal Control over Financial Reporting](index=76&type=section&id=Management%27s%20Report%20on%20Internal%20Control%20over%20Financial%20Reporting) Management concluded that the company's internal control over financial reporting was effective as of December 31, 2019, excluding the recently acquired Bank of York operations - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2019[385](index=385&type=chunk) [Report of Independent Registered Public Accounting Firm](index=77&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Ernst & Young LLP issued unqualified opinions on both the consolidated financial statements and the effectiveness of the company's internal control over financial reporting as of December 31, 2019 - The independent auditor, Ernst & Young LLP, provided an unqualified opinion on both the consolidated financial statements and the effectiveness of internal control over financial reporting[388](index=388&type=chunk)[397](index=397&type=chunk) [Consolidated Financial Statements](index=80&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements show total assets of $2.15 billion and net income of $16.8 million for 2019, with net cash provided by operating and financing activities, and used in investing activities - **Consolidated Balance Sheet Highlights (in thousands)** | Account | Dec 31, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $44,695 | $17,140 | | Loans, net | $1,681,275 | $1,391,371 | | Total Assets | $2,148,916 | $1,786,469 | | **Liabilities & Equity** | | | | Total Deposits | $1,707,706 | $1,361,731 | | Total Liabilities | $1,906,940 | $1,604,207 | | Total Stockholders' Equity | $241,976 | $182,262 | - **Consolidated Income Statement Highlights (in thousands)** | Account | 2019 | 2018 | 2017 | | :--- | :--- | :--- | :--- | | Net Interest Income | $64,818 | $57,370 | $42,517 | | Provision for Loan Losses | $1,908 | $2,570 | $1,540 | | Noninterest Income | $6,216 | $4,318 | $3,815 | | Noninterest Expense | $48,168 | $41,882 | $32,342 | | **Net Income** | **$16,839** | **$13,606** | **$8,202** | [Notes to Consolidated Financial Statements](index=88&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed disclosures on accounting policies, business combinations, loan portfolio quality, investment securities, deposits, borrowings, regulatory capital, and employee benefit plans - Note 2 details the acquisitions of Mainland Bank for **$18.6 million** in stock and Bank of York for **$15.0 million** in cash during 2019, resulting in goodwill of **$4.5 million** and **$4.2 million**, respectively[494](index=494&type=chunk)[500](index=500&type=chunk) - Note 4 provides a detailed breakdown of the loan portfolio, credit quality indicators, and activity in the allowance for loan losses, with **99.2%** of the loan portfolio rated 'Pass' at year-end 2019[542](index=542&type=chunk)[551](index=551&type=chunk) - Note 19 confirms that as of December 31, 2019, both the Company and the Bank were in compliance with all regulatory capital requirements, and the Bank was considered 'well capitalized'[693](index=693&type=chunk)[694](index=694&type=chunk) [Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=146&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reported no changes in or disagreements with its accountants regarding accounting and financial disclosure - None reported[728](index=728&type=chunk) [Item 9A. Controls and Procedures](index=146&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during Q4 2019 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective[729](index=729&type=chunk) - No material changes to internal control over financial reporting occurred in Q4 2019[730](index=730&type=chunk) [Item 9B. Other Information](index=146&type=section&id=Item%209B.%20Other%20Information) No other information is reported - None reported[732](index=732&type=chunk) Part III [Item 10. Directors, Executive Officers and Corporate Governance](index=147&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information for this item is incorporated by reference from the 2020 Proxy Statement, detailing the company's adopted Code of Ethics and Code of Conduct - Information is incorporated by reference from the 2020 Proxy Statement[735](index=735&type=chunk) [Item 11. Executive Compensation](index=147&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation information is incorporated by reference from the company's 2020 Proxy Statement - Information is incorporated by reference from the 2020 Proxy Statement[737](index=737&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=147&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Security ownership and related stockholder matters are incorporated by reference from the 2020 Proxy Statement, with 396,411 securities available for future issuance under equity compensation plans - **Equity Compensation Plan Information (as of Dec 31, 2019)** | Plan Category | Securities to be issued upon exercise | Weighted-average exercise price | Securities remaining available for future issuance | | :--- | :--- | :--- | :--- | | Approved by security holders | 68,772 | $24.35 | 396,411 | | Not approved by security holders | 288,442 | $15.20 | — | | **Total** | **357,214** | **$16.96** | **396,411** | [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=147&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2020 Proxy Statement - Information is incorporated by reference from the 2020 Proxy Statement[742](index=742&type=chunk) [Item 14. Principal Accountant Fees and Services](index=147&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Principal accountant fees and services information is incorporated by reference from the company's 2020 Proxy Statement - Information is incorporated by reference from the 2020 Proxy Statement[743](index=743&type=chunk) Part IV [Item 15. Exhibits, Financial Statement Schedules](index=148&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the financial statements, schedules, and exhibits filed as part of the Form 10-K report, including consolidated financial statements and various corporate documents - This section provides an index of all financial statements and exhibits filed with the Form 10-K[746](index=746&type=chunk) [Item 16. Form 10-K Summary](index=153&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item is not applicable - This item is not applicable[752](index=752&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 _____________________________________ FORM 10-Q _____________________________________ (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2019 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-36522 Investar Holding Corporation (Exact name o ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-36522 Investar Holding Corporation (Exact name of registrant as specified in its charter) Washington D.C. 20549 _____________________________________ FORM 10-Q _____________________________________ (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the ...

[Part I. Financial Information](index=4&type=section&id=Part%20I.%20Financial%20Information) Unaudited financial statements, management's operational analysis, market risk disclosures, and internal control effectiveness are presented [Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Unaudited financial statements show substantial growth in assets, loans, deposits, and net income, largely from the Mainland Bank acquisition [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Consolidated balance sheets show significant increases in total assets, loans, deposits, and equity, primarily from the Mainland Bank acquisition Consolidated Balance Sheet Highlights (Unaudited) | Metric | March 31, 2019 (in thousands) | December 31, 2018 (in thousands) | Change | | :--- | :--- | :--- | :--- | | **Total Assets** | **$1,961,894** | **$1,786,469** | **+9.8%** | | Loans, net | $1,485,277 | $1,391,371 | +6.8% | | Goodwill and other intangible assets, net | $27,143 | $19,787 | +37.2% | | **Total Deposits** | **$1,532,793** | **$1,361,731** | **+12.6%** | | Total Liabilities | $1,758,880 | $1,604,207 | +9.6% | | **Total Stockholders' Equity** | **$203,014** | **$182,262** | **+11.4%** | - The increase in assets, deposits, and goodwill is primarily attributable to the **Mainland Bank acquisition** in Q1 2019[70](index=70&type=chunk) [Consolidated Statements of Income](index=5&type=section&id=Consolidated%20Statements%20of%20Income) Consolidated income statements show increased net interest income, noninterest income, and net income, with diluted EPS rising significantly Consolidated Income Statement Highlights (Unaudited) | Metric | Three months ended March 31, 2019 (in thousands) | Three months ended March 31, 2018 (in thousands) | Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $15,156 | $13,858 | +9.4% | | Provision for loan losses | $265 | $625 | -57.6% | | Total Noninterest Income | $1,281 | $1,072 | +19.5% | | Total Noninterest Expense | $11,303 | $10,562 | +7.0% | | **Net Income** | **$3,917** | **$2,402** | **+63.1%** | | **Diluted EPS** | **$0.40** | **$0.25** | **+60.0%** | [Consolidated Statements of Comprehensive Income](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Total comprehensive income significantly increased, driven by higher net income and positive unrealized gains on investment securities - Total comprehensive income was **$6.0 million** for Q1 2019, a significant increase from **$0.9 million** in Q1 2018, driven by higher net income and a positive swing in other comprehensive income, primarily from a **$2.2 million** unrealized gain on investment securities, compared to a **$1.8 million** loss in the prior year period[15](index=15&type=chunk) [Consolidated Statements of Changes in Stockholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Stockholders' equity increased, driven by common stock issuance for acquisition, net income, and OCI, partially offset by repurchases and dividends - Stockholders' equity increased from **$182.3 million** at year-end 2018 to **$203.0 million** at March 31, 2019, with key drivers including the issuance of **$18.6 million** in common stock for the Mainland acquisition, net income of **$3.9 million**, and other comprehensive income of **$2.0 million**, partially offset by share repurchases of **$3.4 million** and dividends of **$0.5 million**[17](index=17&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash and cash equivalents significantly increased, primarily from cash acquired in the Mainland Bank acquisition within investing activities Consolidated Cash Flow Summary (Unaudited) | Cash Flow Activity | Three months ended March 31, 2019 (in thousands) | Three months ended March 31, 2018 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $5,866 | $4,019 | | Net cash provided by (used in) investing activities | $15,679 | ($33,546) | | Net cash provided by financing activities | $33,718 | $20,208 | | **Net change in cash and cash equivalents** | **$55,263** | **($9,319)** | - The significant increase in cash from investing activities was primarily due to **$38.4 million** in cash acquired from the Mainland Bank acquisition, which more than offset net loan increases and securities purchases[21](index=21&type=chunk) [Notes to the Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) Notes detail the Mainland Bank acquisition's financial impact, loan portfolio specifics, tax rate changes, and off-balance sheet commitments - On March 1, 2019, the Company completed its acquisition of Mainland Bank for approximately **$18.6 million** in stock, adding **$128.4 million** in assets, **$82.4 million** in loans, and **$107.6 million** in deposits, and resulting in the recording of **$5.1 million** in goodwill[70](index=70&type=chunk)[72](index=72&type=chunk) - Total loans increased to **$1.49 billion** at March 31, 2019, from **$1.40 billion** at December 31, 2018, with the allowance for loan losses at **$9.6 million**, representing **0.64%** of total loans[97](index=97&type=chunk)[128](index=128&type=chunk) - The effective tax rate for Q1 2019 was **19.6%**, compared to **35.8%** for Q1 2018, with the higher rate in 2018 due to a **$0.6 million** charge related to the revaluation of deferred tax assets and liabilities from the Tax Cuts and Jobs Act[189](index=189&type=chunk) - The Company had unfunded loan commitments of **$269.7 million** and standby letters of credit of **$11.1 million** as of March 31, 2019[193](index=193&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=39&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes **63% net income growth** to strong loan expansion and lower loan loss provision, with stable credit quality [Financial Condition](index=41&type=section&id=Financial%20Condition) Financial condition improved with significant increases in total loans and deposits, largely driven by the Mainland Bank acquisition and organic growth - Total loans increased by **$94.1 million** (**6.7%**) to **$1.49 billion** at March 31, 2019, compared to year-end 2018, primarily driven by the acquisition of Mainland Bank, which contributed **$81.1 million** in loans[215](index=215&type=chunk) - Total deposits grew by **$171.1 million** (**12.6%**) to **$1.53 billion**, with the Mainland acquisition accounting for **$107.6 million** of this increase, and the remainder from organic growth[227](index=227&type=chunk) - Investment securities increased by **$15.1 million** (**5.7%**) to **$280.1 million**, mainly due to purchases of mortgage-backed securities[221](index=221&type=chunk) [Results of Operations](index=44&type=section&id=Results%20of%20Operations) Results show increased net income, EPS, and returns, with net interest income growth offset by NIM compression and higher noninterest expenses Performance Summary | Metric | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Net Income | $3.9 million | $2.4 million | | Diluted EPS | $0.40 | $0.25 | | Return on Average Assets | 0.86% | 0.60% | | Return on Average Equity | 8.37% | 5.62% | - Net interest income grew **9.4%** to **$15.2 million** in Q1 2019, driven by higher average loan balances, but the net interest margin declined by **17 basis points** to **3.53%** from **3.70%** in Q1 2018, as the cost of interest-bearing liabilities rose faster than the yield on interest-earning assets[236](index=236&type=chunk)[239](index=239&type=chunk) - Noninterest income increased **19.5%** to **$1.3 million**, mainly due to a **$0.2 million** positive change in the fair value of equity securities[246](index=246&type=chunk) - Noninterest expense rose **7.0%** to **$11.3 million**, driven by higher salaries and benefits related to strategic hires and the Mainland acquisition, as well as increased depreciation and other operating costs[249](index=249&type=chunk) [Risk Management](index=48&type=section&id=Risk%20Management) Risk management highlights stable credit quality with a lower loan loss provision, while noting the company's liability-sensitive position to interest rate changes Credit Quality Indicators | Metric | March 31, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Allowance for Loan Losses | $9.6 million | $9.5 million | | ALL / Total Loans | 0.64% | 0.64% | | Nonperforming Loans | $6.0 million | $5.9 million | | NPLs / Total Loans | 0.40% | 0.42% | - The provision for loan losses decreased to **$0.3 million** for Q1 2019 from **$0.6 million** in Q1 2018, reflecting stable credit quality and the impact of a specific charge-off in the prior-year period[260](index=260&type=chunk) - The Company is liability-sensitive in a rising rate environment, with an immediate **100 basis point** increase in interest rates projected to decrease net interest income by **0.4%**, while a **100 basis point** decrease would increase it by **4.9%**[283](index=283&type=chunk) [Liquidity and Capital Resources](index=54&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity is supported by core deposits and FHLB access, with both the company and bank maintaining strong, compliant capital ratios - Core deposits, a primary source of liquidity, funded **64%** of total assets at March 31, 2019, and the Company also has access to FHLB advances, with **$499.5 million** of remaining credit available[286](index=286&type=chunk)[288](index=288&type=chunk) Regulatory Capital Ratios (Company) | Ratio | March 31, 2019 | Requirement | | :--- | :--- | :--- | | Tier 1 Leverage | 10.03% | N/A | | Common Equity Tier 1 | 11.07% | N/A | | Total Capital | 13.23% | N/A | - Both the holding company and the bank were in compliance with all regulatory capital requirements and the bank was considered **'well-capitalized'** as of March 31, 2019[293](index=293&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=58&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) No material changes in market risk since December 31, 2018, with detailed information referenced elsewhere in the report - There have been no material changes in the Company's market risk since December 31, 2018[304](index=304&type=chunk) [Controls and Procedures](index=58&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were deemed effective, with no material changes to internal control over financial reporting during the quarter - The Company's Principal Executive Officer and Principal Financial Officer concluded that disclosure controls and procedures were **effective** as of the end of the reporting period[305](index=305&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[306](index=306&type=chunk) [Part II. Other Information](index=59&type=section&id=Part%20II.%20Other%20Information) Updated risk factors, unregistered equity sales and use of proceeds, and a list of exhibits are presented [Risk Factors](index=59&type=section&id=Item%201A.%20Risk%20Factors) The company refers to its 2018 Annual Report on Form 10-K for a comprehensive discussion of potential risks affecting its financial condition - The company directs investors to the risk factors section of its Annual Report on Form 10-K for the year ended December 31, 2018, for a comprehensive discussion of potential risks[308](index=308&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=59&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased shares in Q1, authorized additional repurchases, and notes dividend payment restrictions Issuer Purchases of Equity Securities (Q1 2019) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | January 2019 | 79,701 | $23.55 | | February 2019 | 29,445 | $23.32 | | March 2019 | 43,773 | $23.55 | | **Total** | **152,919** | **$23.50** | - On February 5, 2019, the board authorized the repurchase of an additional **300,000 shares** of common stock under its repurchase plan[312](index=312&type=chunk) [Exhibits](index=60&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the report, including the Mainland Bank acquisition agreement and required officer certifications - A list of exhibits filed with the report is provided, including governance documents, material contracts, and required certifications[315](index=315&type=chunk) [Signatures](index=61&type=section&id=Signatures) This section contains the required legal signatures for the filing of the report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2018 or ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-36522 ____________________________________________________ Investar Holding Corporation (Exact name of registrant as specified in it ...